 UK M&A activity fell sharply in H2 2008
- Overall in 2008 UK M&A market lead its Western European counterparts -
11 March 2009: UK M&A activity fell by 47% between the first and second halves of 2008 reflecting the worsening global economic outlook as 2008 unfolded, says a new study conducted for PKF Accountants & business advisers.
The PKF report, Deal Drivers UK, produced in association with mergermarket, shows that while there was a flurry of activity in the first half of the year, due mainly to the changes to the UK’s Capital Gains Tax regime from April 2008, the collapse of Lehman Brothers in September fuelled the lack of confidence already in the market, resulting in a 42% drop in deal volumes compared to the same six months of the year in 2007.
Deal value did actually increase by £92.3bn year on year, but this was down to the Government’s bailouts of several of the UK’s leading banks. In total, the purchase by HM Treasury of stakes in Royal Bank of Scotland (RBS), HBOS, Lloyds TSB and Bradford & Bingley accounted for 41% of deal value in the second half. In fact, the Government’s initial acquisition of a 58% equity interest in RBS - which has since increased - was the largest deal undertaken last year with a value of £15bn.
Private equity deals were affected, but private equity houses are adapting to the new face of the market by targeting more defensive niches and focusing on better management of their portfolio companies to preserve and create greater value.
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 | Hugh Mathew-Jones, Head of Corporate Finance at PKF commented: “There is no doubt that M&A activity in the second half of 2008 slowed considerably. General confidence was already low in the first half of the year as was access to debt financing, but the collapse of Lehman Brothers in September 2008 exacerbated these problems and helps explains the 47% drop in deal volume between the first and second halves of the year.
“Greater risk aversion meant that most deals, aside from the bailouts by the Government of several UK banks, occurred within the mid-market and this trend looks set to continue in the beginning of 2009. |
“Deals are not just on a smaller scale than we have been used to in recent years, but they are also happening over a longer period as bidders now conduct more thorough due diligence.
“Ultimately, deals are happening and there are some good opportunities for cash rich buyers as companies with generally sound foundations are simply struggling in an environment where cash is king, but the overall landscape is very different to the recent boom years.”
The report highlights that the UK did still lead its Western European counterparts over the year as whole, accounting for over one-quarter of overall deal flow and almost 40% of deal value in the region. So far in 2009, data shows that although deal flow is down over the first two months compared with 2008, the UK still remains one of the most active deal markets in Western Europe, accounting for a third of all deal volume and one-tenth of value so far in 2009.
Hotels and Leisure, despite the climate, held firm in 2008 with a steady 61 deals worth £1.9bn. The second half of the year only saw 17 of these deals however, while the first half saw 44. There was a similar story for Real Estate which saw 5 deals worth £71m in just the first quarter of the year, but in H2 deal volume was down 34% year on year and deal value was down 80%. There were 113 Manufacturing deals in H1, but in H2 this figure was down by 44%.
PKF commissioned mergermarket to explore the health of UK M&A across five key industry sectors – Hotels & Leisure, Business Services, Food, Real Estate and Manufacturing. mergermarket also interviewed PKF’s leading Corporate Finance partners across the UK’s six main regions – South East, South West & Wales, Midlands, East Anglia, North and Scotland - for their views on regional activity. The fourth edition of Deal Drivers UK looks at deal volumes and values in the UK in the last six months of 2008 and puts it in context with the data from the first six months.
Copies of the 30 page Deal Drivers UK report can be downloaded from www.pkf.co.uk/dealdrivers
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For further information please contact:
Jane Murray, PR Executive, 020 7065 0135, jane.murray@uk.pkf.com
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Notes to Editors:
- Deal Drivers UK is a study of UK M&A activity. PKF Accountants & business advisers commissioned mergermarkets’ research and editorial staff to explore the health of UK M&A across five key industry sectors – Hotels & Leisure, Business Services, Food, Real Estate and Manufacturing. mergermarket was also given access to PKF’s leading Corporate Finance partners across the UK’s six main regions. The data in this fourth edition looks at deal volumes and deal values in the UK in the last six months of 2008 and puts it in context with the data from the first six months.
- PKF is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk.
- mergermarket, part of The Mergermarket Group, is a mergers & acquisitions (M&A) intelligence and research service that tracks all M&A deals over EUR/USD 5m globally. mergermarket has global reach with journalists on the ground across the Americas, Europe and Asia-Pacific focusing on gathering actionable proprietary intelligence to create the only origination database of live targets and bidders. This long term M&A strategic intelligence is backed by related intelligence gathered from over 2000 public sources to create a comprehensive view of any potential or announced M&A event. Add this information to mergermarket's extensive historical deals database and clients are equipped with a unique M&A perspective.
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